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### STATE OF MICHIGAN

COURT OF APPEALS

JOHN HOHENSEE and DONNA HOHENSEE d/b/a RIVER CITY LANES,

Plaintiffs-Appellants, UNPUBLISHED November 3, 2015

v No. 321434
Iron Circuit Court NASSER INSURANCE AGENCY, INC. and DAMON NASSER, LC No. 13-004797-NZ

Defendants-Appellees.

Before: M ARKEY , P.J., and S TEPHENS and R IORDAN , JJ.

P ER C URIAM

.

In this insurance coverage case, plaintiffs appeal as of right the trial court’s order granting summary disposition to defendants. We affirm.

I. FACTS

Plaintiffs claim that defendant Damon Nasser misrepresented th e nature of the coverage when he sold them an insurance policy on their bowling alley su ch that they thought they were entitled to the full policy limits in the event of a total loss . On May 20, 2011, the bowling alley was totally destroyed by fire. The property was insured by Nor th Pointe Insurance (North Pointe) with a policy that provided $500,000 of coverage for th e building, $25,000 for personal property, and $79,000 for busin ess income loss.

On April 12, 2011, North Pointe p rovided a valuation of the pr operty and advised defendants that the bowling alle y might be underinsured. The v aluation indicated that as of September 2010, the cost of reconstructing the building would b e $842,948 and the actual cash value of the equipment was $227,000, for a total of $1,069,948. The valuation showed that the $500,000 limit was insufficient to cover the cost of replacing the subject property in the event of
total loss.

On April 20, 2011, defendant Nasser discussed the valuation with plaintiff John Hohensee. Hohensee claimed that Nasser explained that under th e policy in place with the $500,000 limit he would get $500,000 in case of a total loss re gardless of whether he rebuilt. Hohensee believed that the words “agreed value” in the insuranc e policy supported his claim.-2- Nasser did not think he mentioned any amount that would be paid because he was not an adjuster. Nasser said he did not remember if he told Hohensee that a condition of receiving $500,000 in the event of a total loss on an agreed value policywas to rebuild the property. Hohensee received but never looked at his insurance policy to a ssess whether his coverage was appropriate.

The subject property was listed for sale at $225,000, including the goodwill and a liquor license, when it was destroyed by fire on May 20, 2011. Plaint iffs decided not to rebuild and after submitting a claim, ultimately received insurance proceed s totaling $236,148 from North Pointe. Plaintiffs filed this action arguing that Nasser misre presented the coverage provided by the policy. The trial court gr anted defendants’ motion for sum mary disposition.

II. STANDARD OF REVIEW

This Court reviews summary disposition rulings de novo. Kincaid v Cardwell , 300 Mich App 513, 522; 834 NW2d 122 (2013). This Court also reviews de novo the proper interpretation and application of an insurance policy. Grosse Pointe Park v Mich Muni Liability & Prop Pool

, 473 Mich 188, 196; 702 NW2d 106 (2005). A motion for summary d isposition under MCR 2.116(C)(8) tests the legal sufficiency of a claim by looking a t the pleadings alone, Patterson v
Kleiman , 447 Mich 429, 432; 526 NW2d 879 (1994), and may be granted wh ere the opposing party has failed to state a claim on which relief can be grante d, MCR 2.116(C)(8). All factual allegations in support of the claim are accepted as true. Simko v Blake , 448 Mich 648, 654; 532 NW2d 842 (1995). The motion should be granted only when the cl aim is “so clearly unenforceable as a matter of law that no factual development co uld possibly justify recovery.” Wade v Dep’t of Corrections , 439 Mich 158, 163; 483 NW2d 26 (1992).

A motion under MCR 2.116(C)(10) tests the factual sufficiency of a complaint. Wilson v Alpena Co Rd Comm , 474 Mich 161, 166; 713 NW2d 717 (2006). In deciding a summar y disposition motion under MCR 2.116(C)(10), this Court considers all the evidence, affidavits, pleadings, admissions, and other information available in the r ecord in a light most favorable to the nonmoving party. Rice v Auto Club Ins Ass’n , 252 Mich App 25, 30-31; 651 NW2d 188 (2002). Summary disposition should be granted if there is no g enuine issue of material fact and the moving party is entitled to judgment as a matter of law. Babula v Robertson , 212 Mich App 45, 48; 536 NW2d 834 (1995). In Quinto v Cross & Peters Co , 451 Mich 358, 362-363; 547 NW2d 314 (1996), our Supreme Court delineated the evidentiary r equirements each party must meet to survive summary dis position under MCR 2.116(C)(10):

In presenting a motion for summ ary disposition, the moving par ty has the initial burden of supporting its position by affidavits, deposi tions, admissions, or other documentary evidence. The burden then shifts to the oppo sing party to establish that a genuine issue of disputed fact exists. Where the burden of proof at trial on a dispositive issue rests on a nonmoving party, the no nmoving party may not rely on mere allegations or denials in pleadings, but must go beyond the pleadings to set forth specific f acts showing that a genuine is sue of material fact exists. If the opposing party fails to present documentary evi dence establishing
the existence of a material fact ual dispute, the motion is prop erly granted. [internal citations omitted].-3- III. INSURANCE AGENT’S DUTY

Plaintiffs argue that the trial court erred in ruling that def endant Nasser did not owe any legal duty to plaintiffs and that there were no genuine issues of material fact with regard to whether defendants breached any duty of care owed to plaintiffs under either a misrepresentation or negligence theory. We disagree.

Plaintiffs did not specify whether the alleged misrepresentati on was fraudulent or innocent. “The elements of fraudulent representation are[:] (1 ) the defendant made a material representation, (2) the represen tation was false, (3) when maki ng the representation, the defendant knew or should have known that it was false, (4) the defendant made the representation with the intenti on that the plaintiff would act on it, and (5) the plaintiff acted on it and suffered damages as a result.” Novak v Nationwide Mut Ins Co , 235 Mich App 675, 688; 599 NW2d 546 (1999). The plaintiff’ s reliance on the represent ation must have been reasonable.

Id. at 690. A claim of innocent misrepresentation is shown if a p arty to a contract detrimentally relied upon a false representation in such a manner that the in jury suffered inured to the benefit of the party who made the representation. Id. at 688.

In this case, plaintiffs’ claim for misrepresentation is not v iable in light of their admitted failure to read the insurance pol icy. An insured is obligated to read the insurance policy and to raise questions concerning covera ge within a reasonable time fo llowing the issuance of the policy. Harts v Farmers Ins , 461 Mich 1, 8 n 4; 597 NW2d 47 (1999). “Consistent with this obligation, if the insured has not read the policy, he or she i s nevertheless charged with knowledge of the terms and conditions of the insurance policy.” Casey v Auto-Owners Ins Co

, 273 Mich App 388, 395; 729 NW2d 277 (2006). Hohensee testified that he never looked at his insurance document to verify whether his coverage was appropria te. Both innocent misrepresentation and fraudulent misrepresentation require that a plaintiff establish reasonable reliance on the alleged ma terial misrepresentation. Zaremba Equip, Inc v Harco Nat’l Ins Co

, 280 Mich App 16, 39; 761 NW2d 151 (2008). A party cannot preva il on a misrepresentation claim premised on misrepresentat ions that are contrary to the u nambiguous terms of an insurance policy. Id. at 39-40. Although there is no common law duty to investigate , “[i]gnoring information that contradicts a misrepresentation is considerabl y different than failing to affirmatively and actively i nvestigate a re presentation.” Titan Ins Co v Hyten , 491 Mich 547, 555-556 n 4; 817 NW2d 562 (2012). Given plaintiffs’ admitted f ailure to read the policy, there is no genuine issue of material fact regarding the element of r easonable reliance, and defendants are, therefore, entitled to judgm ent as a matter of law with re spect to plaintiffs’ claim for misrepresentation.

Under the theory of negligence, plaintiffs still cannot prevail as a matter of law because defendants did not breach their duty, if any, and causation was lacking. An insured’s failure to read the policy is not a bar to his or her recovery under a neg ligence theory of relief, and where an agent owes a duty to the insu red, the insured’s failure to r ead the policy is rel evant to the issue of comparative negligence to be weighed against the agent’s neg ligence. See Zaremba , 280 Mich App 29-36. In an action for negligence, a defendant may n ot be held liable where there is not a prima facie showing of a duty, breach of that duty, causa tion, and damages. Case v

Consumers Power Co , 463 Mich 1, 6; 615 NW2d 17 (2000).-4- It is well established that, in a negligence action, the thres hold question, “[w]hether a duty exists[,] is a question of l aw solely for the court to dec ide.” Harts , 461 Mich at 6. Our Supreme Court has he ld that “except under very limited circumst ances,” an insurance agent owes no “affirmative duty to advise or counsel an insured about the adequacy . . . of coverage.” Id . at 2. A “special relationship” between the insured and its agent may give rise to a duty to advise
under limited circumstances. Id. at 10. The Harts Court identified four ex ceptions to the general no-duty-to-advise rule as follows:

(1) [T]he agent misrepresents the nature or extent of the cover age offered or provided, (2) an ambiguous request is made that requires a clar ification, (3) an inquiry is made that may require advice and the agent, though h e need not, gives advice that is inaccurate, or ( 4) the agent assumes an addition al duty by either express agreement with or promise to the insured. [ Id . at 10-11.]

Here, there is no evidence that Hohensee made an ambiguous requ est requiring a clarification, or made an inquiry that might have required Nass er’s advice which was followed by inaccurate advice. Nor is there any evidence that Nasser as sumed an additional duty by either express agreement with or promise to Hohensee.

For a “special relationship” to exist, there needs to be some t ype of interaction on “a question of coverage” with the ins ured relying on the expertise of the insurance agent to the
insured’s detriment. Harts , 461 Mich at 10-11 quoting Bruner v League General Ins Co , 164 Mich App 28, 34; 416 NW2d 318 (1987). Plaintiffs failed to est ablish a necessary “special relationship” that would give rise to the existence of tort dut ies because, as discussed above, there is no genuine issu e of material fact r egarding reasonable reliance.

Even if Nasser, as an independent agent, owed a fiduciary duty to plaintiffs, plaintiffs still cannot prevail because Nasser did not breach such a duty. Fidu ciary duties owed by an insurance agency vary depending upon “the agent’s status as an independent or exclusive agent.” Genesee Foods Services, Inc v Meadowbrook, Inc , 279 Mich App 649, 654; 760 NW2d 259 (2008). In Genesee Foods Services , this Court addressed the duty owed when an independent agent assists a customer with pr ocuring insurance coverage as f ollows:

[B]ecause [the agents] were independent insurance agents when they assisted [the] plaintiffs, their primar y fiduciary duty of loyalty reste d with [the] plaintiffs, who could depend on this duty of loyalty to ensure that [the ag ent] [was] acting in their best interests, both in te rms of finding an insurer that could provide them with the most comprehensive cove rage and in ensuring that the i nsurance contract properly addressed their needs. T he primacy of this relationsh ip between an insured and an independent insurance agent is reflected in Mich igan caselaw, which, as stated earlier, holds that “the independent insurance agent or broker is considered an agent of the insured rather than an agent of the insurer.” [ Id. at 656, quoting West American Ins Co v Meridian Mut Ins Co , 230 Mich App 305, 310; 583 NW2d 548 (1998).]

An agent’s fiduciary duty requires the agent to use reasonable diligence and care to procure insurance as requested by an insured. Zaremba , 280 Mich App at 37-38. The record-5- demonstrates that Hohensee sometimes had difficulty in timely p aying the insurance premium and that he could not afford to buy an extra policy to cover th e replacement cost. Nasser conveyed the information received from North Pointe to Hohensee , discussed the available options, and procured coverage that maintained a low premium wi th a maximum coverage of 500,000. While there was testimony that Hohensee misunderstood the meaning of the words, “agreed value” as found in the policy, and he offered testimony that Nasser told him that he would receive 500,000 regardless of whether he rebuilt, the pol icy is not ambiguous on that point and Hohensee never made a request that he receive a policy whic h would deliver that result. Even if Hohensee harbored a subjective intent that the property be insured to some higher replacement value at the time of the fire, the subject property had been on the market listed at $225,000, and plaintiffs received from North Pointe $236,148 fo r the fire damage. Although North Pointe’s 2010 valuation of the property showed that the a ctual cash value of the building was $354,038, plaintiffs did not pre sent evidence that their ag reed value policy was insufficient
to cover the fire loss.

Plaintiffs also failed to estab lish causation. To establish p roximate cause, two elements must be proven: cause in fact and legal cause. Skinner v Square D Co , 445 Mich 153, 162-163; 516 NW2d 475 (1994). In gen eral, to prove cau se in fact, a pla intiff must show tha t “but for” the defendant’s actions, the plaintiff’s injury would not have occurred. Id. at 163. If cause in fact is established, the issue becomes w hether the defendant’s actions were the legal cause of the injury.

Id. To be the legal cause of the injury, the plaintiff must show that it was foreseeable that the defendant’s conduct would create a risk of harm, and that the r esult of that conduct and intervening causes were foreseeable. Weymers v Khera , 454 Mich 639, 648; 563 NW2d 647 (1997) citing Moning v Alfono , 400 Mich 425, 439; 254 N.2d 759 (1977). Here, cause in fact was lacking because plaintiffs failed to show that but for defe ndants’ actions, their damages
would not have occurred. The r ecord shows that Hohensee unders tood that he could purchase a higher limit to cover the replacement cost, but he could not af ford it. Plaintiffs cannot prove that had it not been for Nasser’s alleg ed misrepresentation, they wo uld not have selected the agreed value policy option.

In addition, it was plaintiffs’ decision not to rebuild the bo wling alley but to cash out, which was not caused in any way by defendants’ actions. The re cord establishes that when Hohensee met with Nasser on April 20, 2011, he had no plans abo ut whether to rebuild the property or cash out i n the event of a tot al loss. Hohensee te stified that he did not recall if he had any discussion with Nasser about that matter. The evidence ind icates that plaintiffs decided to cash out rather than to replace the building after the fire. H ad Hohensee read his policy, he would have known that he would receive more by choosing to rebu ild the property. Plaintiffs’ argument is premised on a misunderstanding of what “agreed valu e” means. According to the plain language of the insurance co ntract, “agreed value” is an amount that the in surer will not exceed in paying for the loss of or damage to the insured prope rty. “Agreed value” is not, as plaintiffs relied, a guaranteed a mount to be paid in the event of a total loss of the property. Hohensee is charged with knowledge of the policy’s terms and co nditions. Moreover, he could have contacted Nasser with questions concerning coverage under the agreed value policy, but he did not do so. Therefore, plai ntiffs cannot establish the requ isite element of causation. Accordingly, the trial court di d not err in gra nting summary di sposition in favor of defendants.-6- Affirmed.

/s/ Jane E. Markey /s/ Cynthia Diane Stephens
/s/ Michael J. Riordan